Alarming Sinking Value of 401(k) Plans

by Sabrina I. Pacifici on January 11, 2009

WSJ – Big Slide in 401(k)s Spurs Calls for Change: “About 50 million Americans have 401(k) plans, which have $2.5 trillion in total assets, estimates the Employee Benefit Research Institute in Washington. In the 12 months following the stock market’s peak in October 2007, more than $1 trillion worth of stock value held in 401(k)s and other “defined-contribution” plans was wiped out, according to the Boston College research center. If individual retirement accounts, which consist largely of money rolled over from 401(k)s, are taken into account, about $2 trillion of stock value evaporated.”

  • Employee Benefit Research Institute: Change In Average Account Balances Among All 401(k) Participants as of 2007, by Age and Tenure, Jan. 1–Dec. 31, 2008

    Center for Retirement Research, Boston College

    • Are Retirement Savings Too Exposed to Market Risk? by Alicia H. Munnell and Dan Muldoon, October 2008, Number 8-16

    • The Financial Crisis and Private Defined Benefit Plans by Alicia H. Munnell, Jean-Pierre Aubry, and Dan Muldoon: “Between October 9, 2007 and October 9, 2008, the value of equities in retirement plans dropped by about $4 trillion, with the decline divided equally between defined benefit and 401(k)/Individual Retirement Accounts (IRAs). The decline in the defined benefit arena was in turn divided equally between private sector plans and those sponsored by state and local governments. This brief explores what a loss of roughly $1 trillion of private sector defined benefit equities means for the individual participants and for the firms that sponsor those plans.”
    • Related postings on financial system

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